Bill Text: TX HB1864 | 2019-2020 | 86th Legislature | Introduced
Bill Title: Relating to the Texas Life and Health Insurance Guaranty Association.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2019-04-16 - Companion considered in lieu of in committee [HB1864 Detail]
Download: Texas-2019-HB1864-Introduced.html
86R8958 SMT-F | ||
By: Smithee | H.B. No. 1864 |
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relating to the Texas Life and Health Insurance Guaranty | ||
Association. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 463.002, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 463.002. PURPOSE. The purpose of this chapter is to | ||
protect, subject to certain limitations, a person specified by | ||
Section 463.201 against failure in the performance of a contractual | ||
obligation under a life, accident, [ |
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or annuity policy, plan, or contract with respect to which this | ||
chapter provides coverage as determined under Subchapter E, because | ||
of the impairment or insolvency of the member insurer that issued | ||
the policy, plan, or contract. | ||
SECTION 2. Section 463.003, Insurance Code, is amended by | ||
amending Subdivisions (4), (7-a), and (9) and adding Subdivisions | ||
(4-a), (4-b), (5-a), and (6-a) to read as follows: | ||
(4) "Covered policy" or "covered contract" means a | ||
policy or contract, or portion of a policy or contract, including a | ||
health maintenance organization contract, with respect to which | ||
this chapter provides coverage as determined under Subchapter E. | ||
(4-a) "Enrollee" means an individual who is enrolled in | ||
a health maintenance organization contract with respect to which | ||
this chapter provides coverage as determined under Subchapter E. | ||
For purposes of this chapter, an enrollee is considered to be an | ||
insured. | ||
(4-b) "Health benefit plan" means a hospital and | ||
medical expense incurred policy or certificate, health maintenance | ||
organization enrollee contract, or any other similar health | ||
contract. The term does not include: | ||
(A) accident-only insurance; | ||
(B) credit insurance; | ||
(C) dental-only insurance; | ||
(D) vision-only insurance; | ||
(E) Medicare supplement insurance; | ||
(F) long-term care coverage or benefits, home | ||
health care coverage or benefits, community-based care coverage or | ||
benefits, or any combination of those coverages or benefits; | ||
(G) disability income insurance; | ||
(H) coverage for on-site medical clinics; or | ||
(I) specified disease, hospital confinement | ||
indemnity, or limited benefit health insurance coverage if the | ||
types of coverage do not provide coordination of benefits and are | ||
provided under separate policies or certificates. | ||
(5-a) "Insurance" includes health benefit plan | ||
coverage. | ||
(6-a) "Insurer" includes a health maintenance | ||
organization. | ||
(7-a) "Owner" means the owner of a policy or contract | ||
and "policyholder," "policy owner," and "contract owner" mean the | ||
person who is identified as the legal owner under the terms of the | ||
policy or contract or who is otherwise vested with legal title to | ||
the policy or contract through a valid assignment completed in | ||
accordance with the terms of the policy or contract and is properly | ||
recorded as the owner on the books of the member insurer. The terms | ||
"owner," "contract owner," "policyholder," and "policy owner" do | ||
not include persons with a mere beneficial interest in a policy or | ||
contract. | ||
(9) "Premium" means an amount received on a covered | ||
policy, less any premium, consideration, or deposit returned on the | ||
policy, and any dividend or experience credit on the policy. The | ||
term does not include: | ||
(A) an amount received for a policy or contract | ||
or part of a policy or contract for which coverage is not provided | ||
under Section 463.202, except that assessable premiums may not be | ||
reduced because of: | ||
(i) an interest limitation provided by | ||
Section 463.203(b)(3); or | ||
(ii) a limitation provided by Section | ||
463.204 with respect to a single individual, participant, | ||
annuitant, or policy or contract owner; | ||
(B) premiums in excess of $5 million on an | ||
unallocated annuity contract not issued under a governmental | ||
benefit plan established under Section 401, 403(b), or 457, | ||
Internal Revenue Code of 1986; | ||
(C) premiums received from the state treasury or | ||
the United States treasury for insurance for which this state or the | ||
United States contracts to: | ||
(i) provide welfare benefits to designated | ||
welfare recipients; or | ||
(ii) implement: | ||
(a) Title 2, Health and Safety Code; | ||
(b) Title 2, Human Resources Code; [ |
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or | ||
(c) the Social Security Act (42 U.S.C. | ||
Section 301 et seq.); or | ||
(D) premiums in excess of $5 million with respect | ||
to multiple nongroup policies of life insurance owned by one owner, | ||
regardless of whether the policy owner is an individual, firm, | ||
corporation, or other person and regardless of whether the persons | ||
insured are officers, managers, employees, or other persons, | ||
regardless of the number of policies or contracts held by the owner. | ||
SECTION 3. Subchapter A, Chapter 463, Insurance Code, is | ||
amended by adding Sections 463.0032 and 463.007 to read as follows: | ||
Sec. 463.0032. USE OF TERMS POLICY AND CONTRACT. For | ||
purposes of this chapter, "policy" and "contract" have the same | ||
meaning. | ||
Sec. 463.007. CONSTRUCTION OF LONG-TERM CARE RIDER. For | ||
purposes of this chapter, benefits provided by a long-term care | ||
rider to a life insurance policy or annuity contract are considered | ||
to be the same type of benefits as the base life insurance policy or | ||
annuity contract. | ||
SECTION 4. Section 463.052, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 463.052. REQUIRED PARTICIPATION IN ASSOCIATION. (a) | ||
As a condition of engaging in the business of insurance in this | ||
state, an insurer, including a mutual assessment company, a local | ||
mutual aid association, a statewide mutual assessment company, | ||
[ |
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organization authorized to engage in business in this state, shall | ||
participate as a member of the association if the insurer holds a | ||
certificate of authority to engage in a kind of insurance business | ||
in this state with respect to which this chapter provides coverage | ||
as determined under Subchapter E. The requirement to participate | ||
applies regardless of whether the insurer's certificate of | ||
authority in this state is suspended, revoked, not renewed, or | ||
voluntarily withdrawn. | ||
(b) The following do not participate as member insurers: | ||
(1) [ |
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[ |
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(2) [ |
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(3) [ |
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(4) [ |
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authority or license limited to the issuance of charitable gift | ||
annuities, as defined by this code or rules adopted by the | ||
commissioner; and | ||
(5) [ |
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Subdivision (1), (2), (3), or (4)[ |
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SECTION 5. Section 463.053, Insurance Code, is amended by | ||
adding Subsection (c-1) to read as follows: | ||
(c-1) The commissioner shall consider, among other things, | ||
whether the directors appointed under Subsections (b) and (c) | ||
fairly represent the member insurers that are health maintenance | ||
organizations and life, health, and annuity insurers. | ||
SECTION 6. Sections 463.059(a), (c), and (f), Insurance | ||
Code, are amended to read as follows: | ||
(a) Notwithstanding Chapter 551, Government Code, or any | ||
other law, the board or a committee of the board may meet by | ||
telephone conference call, videoconference, or other similar | ||
telecommunication method [ |
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videoconference, or other similar telecommunication method for | ||
establishing a quorum, voting, or any other meeting purpose in | ||
accordance with this section regardless of the subject matter | ||
discussed or considered by the board at the meeting. | ||
(c) The notice of a meeting authorized by this section must | ||
specify [ |
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(f) An audio or digital recording of a meeting authorized by | ||
this section must be made in accordance with the association's | ||
bylaws. The recording of the open portion of the meeting must be | ||
posted on the association's Internet website [ |
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SECTION 7. Section 463.101(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) The association may: | ||
(1) enter into contracts as necessary or proper to | ||
carry out this chapter and the purposes of this chapter; | ||
(2) sue or be sued, including taking: | ||
(A) necessary or proper legal action to: | ||
(i) recover an unpaid assessment under | ||
Subchapter D; or | ||
(ii) settle a claim or potential claim | ||
against the association; or | ||
(B) necessary legal action to avoid payment of an | ||
improper claim; | ||
(3) borrow money to effect the purposes of this | ||
chapter; | ||
(4) exercise, for the purposes of this chapter and to | ||
the extent approved by the commissioner, the powers of a domestic | ||
life, accident, or health insurance company, a health maintenance | ||
organization, or a group hospital service corporation, except that | ||
the association may not issue an insurance policy or annuity | ||
contract other than to perform the association's obligations under | ||
this chapter; | ||
(5) unless prohibited by other law, implement or file | ||
for an actuarially justified rate or premium increase in accordance | ||
with the terms and conditions of a covered policy or contract; | ||
(6) to further the association's purposes, exercise | ||
the association's powers, and perform the association's duties, | ||
join an organization of one or more state associations that have | ||
similar purposes; | ||
(7) [ |
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coverage from the association in determining its obligations under | ||
this chapter with respect to the person, and the person shall | ||
promptly comply with the request; and | ||
(8) [ |
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action to discharge the association's duties and obligations under | ||
this chapter or to exercise the association's powers under this | ||
chapter. | ||
SECTION 8. Section 463.102(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The association may amend the plan of operation. An | ||
amendment must be approved by the commissioner and takes effect on: | ||
(1) the date the commissioner approves the amendment; | ||
or | ||
(2) the 60th [ |
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submitted to the commissioner for approval, if the commissioner | ||
does not approve or disapprove the amendment before the 60th [ |
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day. | ||
SECTION 9. Section 463.109, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 463.109. ASSOCIATION APPEARANCE BEFORE COURT; | ||
INTERVENTION. (a) The association may appear before a court in | ||
this state with jurisdiction over an impaired or insolvent insurer | ||
concerning which the association is or may become obligated under | ||
this chapter. The association's right to appear applies to: | ||
(1) a proposal for reinsuring, reissuing, modifying, | ||
or guaranteeing the insurer's policies or contracts; | ||
(2) the determination of the insurer's policies or | ||
contracts and contractual obligations; and | ||
(3) any other matter germane to the association's | ||
powers and duties. | ||
(b) The association may appear or intervene before a court | ||
in another state with jurisdiction over: | ||
(1) an impaired or insolvent insurer concerning which | ||
the association is or may become obligated; or | ||
(2) a third party against whom the association may | ||
have rights through subrogation of the insurer's policyholders or | ||
enrollees. | ||
SECTION 10. Sections 463.114(c), (d), and (e), Insurance | ||
Code, are amended to read as follows: | ||
(c) At the expiration of the 60th day after approval of the | ||
document, a member [ |
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with respect to which this chapter provides coverage as determined | ||
under Subchapter E to a policy, [ |
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holder or enrollee before a copy of the summary document is | ||
delivered to the policy, [ |
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enrollee. The document must also be available on request of a | ||
policy, contract, or certificate holder or enrollee | ||
[ |
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(d) The distribution, delivery, content, or interpretation | ||
of a summary document does not guarantee that a policy or contract | ||
or a policy, [ |
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provided coverage by this chapter if a member insurer becomes | ||
impaired or insolvent. Failure to receive the document does not | ||
give an insured or policy, contract, or certificate holder or | ||
enrollee any rights greater than those provided by this chapter. | ||
(e) An insurer or agent may not deliver a policy or contract | ||
described by Section 463.202 that is excluded from the coverage | ||
provided by this chapter by Section 463.203 unless the insurer or | ||
agent, either before or in conjunction with delivery, gives the | ||
policy, [ |
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written notice clearly and conspicuously disclosing that the policy | ||
or contract is not covered by the association. | ||
SECTION 11. Section 463.153, Insurance Code, is amended by | ||
amending Subsections (b) and (c) and adding Subsection (b-1) to | ||
read as follows: | ||
(b) Class B assessments on [ |
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each account under Section 463.105 shall be authorized and called | ||
in the proportion that the premiums received on business in this | ||
state by the member insurer on policies or contracts covered by each | ||
account for the three most recent calendar years for which | ||
information is available preceding the year in which the impaired | ||
or insolvent member insurer became impaired or insolvent bear to | ||
premiums received on business in this state for those calendar | ||
years by all assessed member insurers. Except for assessments | ||
related to long-term care insurance as described by Subsection | ||
(b-1), the [ |
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among the separate accounts in accordance with an allocation | ||
formula that may be based on: | ||
(1) the premiums or reserves of the impaired or | ||
insolvent insurer; or | ||
(2) any other standard deemed by the board in the | ||
board's sole discretion as being fair and reasonable under the | ||
circumstances. | ||
(b-1) The amount of a Class B assessment for long-term care | ||
insurance written by an impaired or insolvent member insurer shall | ||
be allocated according to a methodology included in the plan of | ||
operation and approved by the commissioner. The methodology must | ||
provide for 50 percent of the assessment to be allocated to accident | ||
and health member insurers and 50 percent to be allocated to life | ||
and annuity member insurers. This subsection does not apply to a | ||
rider to a member insurer's life insurance policy or annuity | ||
contract that provides long-term care benefits. | ||
(c) The total amount of assessments on a member insurer for | ||
each account under Section 463.105 may not in one calendar year | ||
exceed two percent of the insurer's average annual premiums on the | ||
policies covered by the account during the three calendar years | ||
preceding the year in which the impaired or insolvent member | ||
insurer became an impaired or insolvent insurer. If two or more | ||
assessments are authorized in a calendar year with respect to | ||
member insurers that become impaired or insolvent in different | ||
calendar years, the average annual premiums for purposes of the | ||
aggregate assessment percentage limitation described by this | ||
subsection shall be equal to the higher of the three-year average | ||
annual premiums for the applicable subaccount or account as | ||
computed in accordance with this section. If the maximum | ||
assessment and the other assets of the association do not provide in | ||
a year an amount sufficient to carry out the association's | ||
responsibilities, the association shall make necessary additional | ||
assessments as soon as this chapter permits. | ||
SECTION 12. Sections 463.154 and 463.201, Insurance Code, | ||
are amended to read as follows: | ||
Sec. 463.154. DEFERMENT. The association may wholly or | ||
partly defer an assessment on [ |
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association believes payment of the assessment would endanger the | ||
ability of the insurer to fulfill the insurer's contractual | ||
obligations. The amount of the assessment that is deferred may be | ||
assessed against the other member insurers in a manner consistent | ||
with this subchapter. | ||
Sec. 463.201. PERSONS [ |
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Subsections (b) and (c), this chapter provides coverage for a | ||
policy or contract described by Section 463.202 to a person who is: | ||
(1) a person, other than a certificate holder under a | ||
group policy or contract who is not a resident, who is a | ||
beneficiary, assignee, or payee, including a health care provider | ||
who renders services covered under a health insurance policy or | ||
certificate, of a person described by Subdivision (2); | ||
(2) a person who is an owner of or certificate holder | ||
or enrollee under a policy or contract specified by Section | ||
463.202, other than an unallocated annuity contract or structured | ||
settlement annuity, and who is: | ||
(A) a resident; or | ||
(B) not a resident, but only under all of the | ||
following conditions: | ||
(i) the member insurers that issued the | ||
policies or contracts are domiciled in this state; | ||
(ii) the state in which the person resides | ||
has an association similar to the association; and | ||
(iii) the person is not eligible for | ||
coverage by an association in any other state because the insurer or | ||
health maintenance organization was not licensed in the state at | ||
the time specified in that state's guaranty association law; | ||
(3) a person who is the owner of an unallocated annuity | ||
contract issued to or in connection with: | ||
(A) a benefit plan whose plan sponsor has the | ||
sponsor's principal place of business in this state; or | ||
(B) a government lottery, if the owner is a | ||
resident; or | ||
(4) a person who is the payee under a structured | ||
settlement annuity, or beneficiary of the payee if the payee is | ||
deceased, if: | ||
(A) the payee is a resident, regardless of where | ||
the contract owner resides; | ||
(B) the payee is not a resident, the contract | ||
owner of the structured settlement annuity is a resident, and the | ||
payee is not eligible for coverage by the association in the state | ||
in which the payee resides; or | ||
(C) the payee and the contract owner are not | ||
residents, the insurer that issued the structured settlement | ||
annuity is domiciled in this state, the state in which the contract | ||
owner resides has an association similar to the association, and | ||
neither the payee or, if applicable, the payee's beneficiary, nor | ||
the contract owner is eligible for coverage by the association in | ||
the state in which the payee or contract owner resides. | ||
(b) This chapter does not provide coverage to: | ||
(1) a person who is a payee or the beneficiary of a | ||
payee with respect to a contract the owner of which is a resident of | ||
this state, if the payee or the payee's beneficiary is afforded any | ||
coverage by the association of another state; [ |
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(2) a person otherwise described by Subsection (a)(3), | ||
if any coverage is provided by the association of another state to | ||
that person; or | ||
(3) a person who acquires rights to receive payments | ||
through a structured settlement factoring transaction as defined by | ||
Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C. | ||
Section 5891(c)(3)(A)), regardless of whether the transaction | ||
occurred before, on, or after the date that section became | ||
effective. | ||
(c) This chapter is intended to provide coverage to persons | ||
who are residents of this state, and in those limited circumstances | ||
as described in this chapter, to nonresidents. In order to avoid | ||
duplicate coverage, if a person who would otherwise receive | ||
coverage under this chapter is provided coverage under the laws of | ||
any other state, the person may not be provided coverage under this | ||
chapter. In determining the application of the provisions of this | ||
subsection in situations in which a person could be covered by the | ||
association of more than one state, whether as an owner, payee, | ||
enrollee, beneficiary, or assignee, this chapter shall be construed | ||
in conjunction with other state laws to result in coverage by only | ||
one association. | ||
SECTION 13. Section 463.202(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) Except as limited by this chapter, the coverage provided | ||
by this chapter to a person specified by Section 463.201, subject to | ||
Sections 463.201(b) and (c), applies with respect to the following | ||
policies and contracts issued by a member insurer: | ||
(1) a direct, nongroup life, health, accident, | ||
annuity, or supplemental policy or contract, including a health | ||
maintenance organization contract or certificate; | ||
(2) a certificate under a direct group policy or | ||
contract; | ||
(3) a group hospital service contract; and | ||
(4) an unallocated annuity contract. | ||
SECTION 14. Section 463.203, Insurance Code, is amended by | ||
amending Subsection (b) and adding Subsection (b-1) to read as | ||
follows: | ||
(b) This chapter does not provide coverage for: | ||
(1) any part of a policy or contract not guaranteed by | ||
the insurer or under which the risk is borne by the policy or | ||
contract owner; | ||
(2) a policy or contract of reinsurance, unless an | ||
assumption certificate has been issued; | ||
(3) any part of a policy or contract to the extent that | ||
the rate of interest on which that part is based: | ||
(A) as averaged over the period of four years | ||
before the date the member insurer becomes impaired or insolvent | ||
under this chapter, whichever is earlier, exceeds a rate of | ||
interest determined by subtracting two percentage points from | ||
Moody's Corporate Bond Yield Average averaged for the same | ||
four-year period or for a lesser period if the policy or contract | ||
was issued less than four years before the date the member insurer | ||
becomes impaired or insolvent under this chapter, whichever is | ||
earlier; and | ||
(B) on and after the date the member insurer | ||
becomes impaired or insolvent under this chapter, whichever is | ||
earlier, exceeds the rate of interest determined by subtracting | ||
three percentage points from Moody's Corporate Bond Yield Average | ||
as most recently available; | ||
(4) a portion of a policy or contract issued to a plan | ||
or program of an employer, association, similar entity, or other | ||
person to provide life, health, or annuity benefits to the entity's | ||
employees, members, or others, to the extent that the plan or | ||
program is self-funded or uninsured, including benefits payable by | ||
an employer, association, or similar entity under: | ||
(A) a multiple employer welfare arrangement as | ||
defined by Section 3, Employee Retirement Income Security Act of | ||
1974 (29 U.S.C. Section 1002); | ||
(B) a minimum premium group insurance plan; | ||
(C) a stop-loss group insurance plan; or | ||
(D) an administrative services-only contract; | ||
(5) any part of a policy or contract to the extent that | ||
the part provides dividends, experience rating credits, or voting | ||
rights, or provides that fees or allowances be paid to any person, | ||
including the policy or contract owner, in connection with the | ||
service to or administration of the policy or contract; | ||
(6) a policy or contract issued in this state by a | ||
member insurer at a time the insurer was not authorized to issue the | ||
policy or contract in this state; | ||
(7) an unallocated annuity contract issued to or in | ||
connection with a benefit plan protected under the federal Pension | ||
Benefit Guaranty Corporation, regardless of whether the Pension | ||
Benefit Guaranty Corporation has not yet become liable to make any | ||
payments with respect to the benefit plan; | ||
(8) any part of an unallocated annuity contract that | ||
is not issued to or in connection with a specific employee, a | ||
benefit plan for a union or association of individuals, or a | ||
governmental lottery; | ||
(9) any part of a financial guarantee, funding | ||
agreement, or guaranteed investment contract that: | ||
(A) does not contain a mortality guarantee; and | ||
(B) is not issued to or in connection with a | ||
specific employee, a benefit plan, or a governmental lottery; | ||
(10) a part of a policy or contract to the extent that | ||
the assessments required by Subchapter D with respect to the policy | ||
or contract are preempted by federal or state law; | ||
(11) a contractual agreement that established the | ||
member insurer's obligations to provide a book value accounting | ||
guaranty for defined contribution benefit plan participants by | ||
reference to a portfolio of assets that is owned by the benefit plan | ||
or the plan's trustee in a case in which neither the benefit plan | ||
sponsor nor its trustee is an affiliate of the member insurer; | ||
(12) a part of a policy or contract to the extent the | ||
policy or contract provides for interest or other changes in value | ||
that are to be determined by the use of an index or external | ||
reference stated in the policy or contract, but that have not been | ||
credited to the policy or contract, or as to which the policy or | ||
contract owner's rights are subject to forfeiture, as of the date | ||
the member insurer becomes an impaired or insolvent insurer under | ||
this chapter, whichever date is earlier, subject to Subsection (c); | ||
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(13) a policy or contract providing a hospital, | ||
medical, prescription drug, or other health care benefit under 42 | ||
U.S.C. Sections 1395w-21 et seq. and 1395w-101 et seq. (Medicare | ||
Parts C and D), 42 U.S.C. Sections 1396-1396w-5 (Medicaid), or 42 | ||
U.S.C. Sections 1397aa-1397mm (State Children's Health Insurance | ||
Program) or a regulation adopted under those federal statutes; or | ||
(14) structured settlement annuity benefits to which a | ||
payee or beneficiary has transferred the payee's or beneficiary's | ||
rights in a structured settlement factoring transaction as defined | ||
by Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C. | ||
Section 5891(c)(3)(A)), regardless of whether the factoring | ||
transaction occurred before, on, or after the date that section | ||
became effective. | ||
(b-1) The exclusion from coverage described by Subsection | ||
(b)(3) does not apply to any portion of a policy or contract, | ||
including a rider, that provides long-term care benefits or any | ||
other health insurance benefit. | ||
SECTION 15. Section 463.204, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual | ||
obligation does not include: | ||
(1) death benefits in an amount in excess of $300,000 | ||
or a net cash surrender or net cash withdrawal value in an amount in | ||
excess of $100,000 under one or more life insurance policies on a | ||
single life; | ||
(2) an amount in excess of: | ||
(A) $250,000 in the present value under one or | ||
more annuity contracts issued with respect to a single life under | ||
individual annuity policies or group annuity policies; or | ||
(B) $5 million in unallocated annuity contract | ||
benefits with respect to a single contract owner regardless of the | ||
number of those contracts; | ||
(3) an amount in excess of the following amounts, | ||
including any net cash surrender or cash withdrawal values, under | ||
one or more accident, health, accident and health, or long-term | ||
care insurance policies on a single life: | ||
(A) $500,000 for health benefit plans [ |
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(B) $300,000 for disability income and long-term | ||
care insurance, as those terms are defined by this code or rules | ||
adopted by the commissioner; or | ||
(C) $200,000 for coverages that are not defined | ||
as health benefit plans [ |
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(4) an amount in excess of $250,000 in present value | ||
annuity benefits, in the aggregate, including any net cash | ||
surrender and net cash withdrawal values, with respect to each | ||
individual participating in a governmental retirement benefit plan | ||
established under Section 401, 403(b), or 457, Internal Revenue | ||
Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by | ||
an unallocated annuity contract or the beneficiary or beneficiaries | ||
of the individual if the individual is deceased; | ||
(5) an amount in excess of $250,000 in present value | ||
annuity benefits, in the aggregate, including any net cash | ||
surrender and net cash withdrawal values, with respect to each | ||
payee of a structured settlement annuity or the beneficiary or | ||
beneficiaries of the payee if the payee is deceased; | ||
(6) aggregate benefits in an amount in excess of | ||
$300,000 with respect to a single life, except with respect to: | ||
(A) benefits paid under health benefit plans | ||
[ |
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aggregate benefits are $500,000; and | ||
(B) benefits paid to one owner of multiple | ||
nongroup policies of life insurance, whether the policy owner is an | ||
individual, firm, corporation, or other person, and whether the | ||
persons insured are officers, managers, employees, or other | ||
persons, in which case the maximum benefits are $5 million | ||
regardless of the number of policies and contracts held by the | ||
owner; | ||
(7) an amount in excess of $5 million in benefits, with | ||
respect to either one plan sponsor whose plans own directly or in | ||
trust one or more unallocated annuity contracts not included in | ||
Subdivision (4) irrespective of the number of contracts with | ||
respect to the contract owner or plan sponsor or one contract owner | ||
provided coverage under Section 463.201(a)(3)(B), except that, if | ||
one or more unallocated annuity contracts are covered contracts | ||
under this chapter and are owned by a trust or other entity for the | ||
benefit of two or more plan sponsors, coverage shall be afforded by | ||
the association if the largest interest in the trust or entity | ||
owning the contract or contracts is held by a plan sponsor whose | ||
principal place of business is in this state, and in no event shall | ||
the association be obligated to cover more than $5 million in | ||
benefits with respect to all these unallocated contracts; | ||
(8) any contractual obligations of the insolvent or | ||
impaired insurer under a covered policy or contract that do not | ||
materially affect the economic value of economic benefits of the | ||
covered policy or contract; or | ||
(9) punitive, exemplary, extracontractual, or bad | ||
faith damages, regardless of whether the damages are: | ||
(A) agreed to or assumed by an insurer, [ |
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insured, or covered person; or | ||
(B) imposed by a court. | ||
SECTION 16. Section 463.251(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) With the commissioner's approval, the association may: | ||
(1) guarantee, assume, reissue, or reinsure, or cause | ||
to be guaranteed, assumed, reissued, or reinsured, one or more of | ||
the insurer's policies or contracts; | ||
(2) provide money, pledges, notes, guarantees, or | ||
other means proper to: | ||
(A) implement Subdivision (1); and | ||
(B) ensure payment of the insurer's contractual | ||
obligations until action is taken under Subdivision (1); or | ||
(3) loan money to the insurer. | ||
SECTION 17. Section 463.252(c), Insurance Code, is amended | ||
to read as follows: | ||
(c) A policy or contract owner, certificate holder, or | ||
enrollee who claims emergency or hardship may petition for | ||
substitute benefits under standards the association proposes and | ||
the commissioner approves. Substitute benefits are available only | ||
for a health claim, periodic annuity benefit payment, death | ||
benefit, supplemental benefit, or cash withdrawal. | ||
SECTION 18. Section 463.253(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The association shall provide money, pledges, | ||
guarantees, or other means reasonably necessary to discharge the | ||
insurer's duties and to: | ||
(1) guarantee, assume, reissue, or reinsure, or cause | ||
to be guaranteed, assumed, reissued, or reinsured, the insurer's | ||
policies or contracts; or | ||
(2) ensure payment of the insurer's contractual | ||
obligations. | ||
SECTION 19. Sections 463.254(b), (e), (f), (g), (h), and | ||
(i), Insurance Code, are amended to read as follows: | ||
(b) The association, in accordance with Subsections (c) and | ||
(d), as applicable, shall ensure payment of benefits identical to | ||
the benefits that would have been payable under the policy or | ||
contract of the insurer[ |
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(e) The association shall diligently attempt to provide | ||
each known insured, enrollee, or group policy or contract holder | ||
[ |
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benefits are terminated. | ||
(f) As provided by Subsections (g)-(i), the association | ||
shall make substitute coverage available on an individual basis to: | ||
(1) each known insured or enrollee under an individual | ||
policy, or the owner if other than the insured or enrollee; and | ||
(2) each individual who: | ||
(A) was formerly insured or enrolled under a | ||
group policy or contract; and | ||
(B) is not eligible for replacement group | ||
coverage. | ||
(g) Substitute coverage is available for an individual | ||
policy under Subsection (f) only if the insured, enrollee, or owner | ||
was entitled under law or the terminated policy to continue an | ||
individual policy in force until a specified age or for a specified | ||
period during which the insurer: | ||
(1) was not entitled to unilaterally change a | ||
provision of the policy; or | ||
(2) was entitled only to change a premium by class. | ||
(h) Substitute coverage is available for a group policy or | ||
contract under Subsection (f) only if the formerly insured or | ||
enrolled individual was entitled under law or the terminated policy | ||
or contract to convert group coverage to individual coverage. | ||
(i) To provide substitute coverage under Subsection (f), | ||
the association may offer to reissue the terminated coverage or | ||
issue an alternative policy. The association shall offer the | ||
reissued or alternative policy without requiring evidence of | ||
insurability, at actuarially justified rates. The reissued or | ||
alternative policy may not provide for a waiting period or | ||
exclusion that would not have applied under the terminated | ||
policy. The association may reinsure a reissued or alternative | ||
policy. | ||
SECTION 20. Section 463.256(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The association shall set the premium according to a | ||
table of rates the association adopts. The premium: | ||
(1) must reflect: | ||
(A) the amount of insurance provided; and | ||
(B) each insured's or enrollee's age and class of | ||
risk; and | ||
(2) may not reflect any change in an insured's or | ||
enrollee's health occurring after the original policy was most | ||
recently underwritten. | ||
SECTION 21. Section 463.258, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 463.258. PREMIUM FOR REISSUANCE OF TERMINATED | ||
COVERAGE. If the association reissues terminated coverage at a | ||
premium different from the terminated policy's premium, the premium | ||
must: | ||
(1) reflect the amount of insurance provided and the | ||
insured's or enrollee's age and class of risk; and | ||
(2) be approved by the commissioner or a court. | ||
SECTION 22. Section 463.260(b), Insurance Code, is amended | ||
to read as follows: | ||
(b) The association's obligations with respect to coverage | ||
under a policy of an impaired or insolvent insurer or under a | ||
reissued or alternative policy terminate on the date the coverage | ||
or policy is replaced by another similar policy by the | ||
policyholder, the contract owner, the insured, the enrollee, or the | ||
association. | ||
SECTION 23. Sections 463.261(a) and (c), Insurance Code, | ||
are amended to read as follows: | ||
(a) A person receiving a benefit under this chapter, | ||
including a payment of or on account of a contractual obligation, | ||
continuation of coverage, or provision of substitute or alternative | ||
coverage, is considered to have assigned to the association the | ||
rights under, and any cause of action relating to, the covered | ||
policy to the extent of the benefit received. The association may | ||
require a payee, policy or contract owner, beneficiary, insured, | ||
enrollee, or annuitant to assign the person's rights and cause of | ||
action to the association as a condition of receiving a right or | ||
benefit under this chapter. | ||
(c) The association has all common law rights of subrogation | ||
and any other equitable or legal remedy that would have been | ||
available to the impaired or insolvent insurer or holder, | ||
beneficiary, enrollee, or payee of a policy or contract with | ||
respect to the policy or contract. | ||
SECTION 24. Section 463.304, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 463.304. DISTRIBUTION OF OWNERSHIP RIGHTS OF IMPAIRED | ||
OR INSOLVENT INSURER. In making an equitable distribution of the | ||
ownership rights of an impaired or insolvent insurer before the | ||
termination of a receivership, the court: | ||
(1) shall consider the welfare of the policyholders, | ||
contract owners, certificate holders, and enrollees of the | ||
continuing or successor insurer; and | ||
(2) may consider the contributions of the respective | ||
parties, including the association, the shareholders, [ |
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policyholders, contract owners, certificate holders, and enrollees | ||
of the impaired or insolvent insurer, and any other party with a | ||
bona fide interest. | ||
SECTION 25. Section 463.351(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) The commissioner shall: | ||
(1) notify the insurance officials of all the other | ||
states, territories of the United States, and the District of | ||
Columbia by mail not later than the 30th day after the date the | ||
commissioner: | ||
(A) revokes or suspends a member insurer's | ||
certificate of authority; or | ||
(B) issues a formal order requiring a member | ||
insurer to: | ||
(i) restrict the insurer's premium writing; | ||
(ii) withdraw from this state; | ||
(iii) reinsure all or part of the insurer's | ||
business; | ||
(iv) obtain additional contributions to | ||
surplus; or | ||
(v) increase capital, surplus, or another | ||
account for the security of policyholders, contract owners, or | ||
creditors; | ||
(2) report to the board when the commissioner: | ||
(A) takes an action described by Subdivision (1) | ||
or receives from another insurance official a report indicating | ||
that a similar action has been taken in another state; or | ||
(B) has reasonable cause to believe from a | ||
completed or continuing examination that a member insurer may be | ||
impaired or insolvent; and | ||
(3) provide to the board the National Association of | ||
Insurance Commissioners Insurance Regulatory Information System | ||
ratios and listings of insurers not included in those ratios. | ||
SECTION 26. The changes in law made by this Act apply only | ||
to an insurer that first becomes impaired or insolvent on or after | ||
the effective date of this Act. | ||
SECTION 27. This Act takes effect September 1, 2019. |